The Multibusiness Phenomenon beyond Conglomerates

and Business Groups: A Corporate Management

Perspective

El fenómeno de las empresas multinegocios más allá de los

conglomerados y grupos empresariales: una perspectiva
de estrategia corporativa

Luz María Rivas-Montoyaa · Diana Londoño-Correab

Clasificación: Trabajo empírico – investigación

Recibido: 29 – Julio - 2019 / Aceptado: 20- Octubre - 2019

Abstract
Businesses and not multibusiness firms are the ones that compete. While each business needs its own competi-
tive strategy, multibusiness firms require corporate management for capturing synergies. The competitive view has
triggered the emergence of multiple businesses within a single firm. Despite this, it is common to find managers who
are unaware of the benefits that joint management brings to the performance of a multibusiness company. Managing
multibusiness firms implies facing a paradox: leveraging business uniqueness while creating joint value for the multi-
business company. This paper characterizes the multibusiness phenomenon from the existence of ownership ties and
coordinated actions, by qualitatively researching 21 Colombian multibusiness firms. It contributes to the managerial
knowledge of these types of firms in two different ways: by identifying the multibusiness phenomenon in a variety of
companies, and by highlighting the benefits of the joint management of a multibusiness firm.

Keywords: Multibusiness firm, business groups, conglomerates, formal ownership ties, coordinated action.

Resumen
Los negocios y no los grupos económicos son los que compiten. Mientras cada negocio requiere de su propia
estrategia competitiva, una empresa multinegocios demanda, además, una administración conjunta que le permita cap-
turar sinergias. La visión competitiva ha motivado el surgimiento de múltiples negocios en una empresa. Sin embargo,
es frecuente que los gerentes no sean conscientes de los beneficios que la administración conjunta puede aportar
a los resultados de la empresa multinegocios. Administrar una empresa multinegocios implica enfrentar una para-
doja: apalancar la diferenciación de cada negocio y, simultáneamente, crear valor para la empresa multinegocios. Este
artículo caracteriza el fenómeno multinegocios desde la existencia de vínculos de propiedad y acciones coordina-
das, a partir de una investigación cualitativa en 21 empresas multinegocios colombianas. Por tanto, contribuye al co-
nocimiento gerencial de empresas de este tipo de dos maneras: 1) por identificar el fenómeno multinegocios en una
variedad de compañías y 2) por resaltar los beneficios de la administración conjunta.

Palabras clave: empresas multinegocios, grupos empresariales, conglomerados, vínculos formales de propiedad,
acción coordinada.

a
Full professor at the School of Management, Universidad EAFIT, Medellín, Colombia. email: lrivasm@eafit.edu.co

b
Senior Lecturer at the School of Management, Universidad EAFIT, Medellín, Colombia. email: dlondono@eafit.edu.co

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DOI: https://doi.org/10.35692/07183992.12.2.3
Introduction
A multibusiness firm is one that exhibits the multibusi-
ness phenomenon. It is structured as a multi-unit organi-
zation and divided into different businesses that focus on
particular product-market segments (Eisenhardt & Pie-
zunka, 2011). Both conglomerates and business groups
are multibusiness firms, but the multibusiness phenom-
enon is not exclusive to them. Recently, there has been
a growing interest in business models and a fine-tuned
competitive strategy for each of the businesses grouped
in conglomerates, business groups or any other multibusi-
ness companies. A first step towards managing a multi-
business firm is to be aware of the two levels of strategy:
competitive and corporate. While each business needs its
own competitive strategy, the multibusiness firm requires
a corporate strategy in order to benefit from the coordi-
nated actions between businesses. This means that there
is no need to be big, diversified or the result of an M&A
in order to exhibit the multibusiness phenomenon and to
demand joint management.
The common factor between conglomerates and busi-
ness groups is the multibusiness phenomenon, and with
it comes the relevance of the joint management of the
businesses (Ahuja & Novelli, 2017; Menz, Kunisch,
& Collis, 2015). A Conglomerate is a group of auto-
nomous business units operating in unrelated or weakly
related industries. Conglomerates have been character-
ized by the diversity of industries wherein they com-
pete (Bettis, 2017). On the other hand, Business groups
(BGs) are an organizational model in which collections
of legally independent firms are bounded together with
formal and informal ties and use collaborative arrange-
ments to enhance their collective welfare (Colpan &
Cuervo-Cazurra, 2016). While the former have been
mainly studied in the Anglo-Saxon contexts, the latter,
business groups, have been mostly recognized in emerg-
ing markets (Colpan & Hikino, 2018). The management
of a multibusiness firm can benefit from the literature of
both conglomerates and business groups, independently
of the context studied, since they address different ties
and coordinated actions within a set of businesses. Ties
between businesses can be formal or informal, but for-
mal ties are a common feature between conglomerates
and business groups. Ownership, a formal tie, is the most
relevant when addressing joint management.
A joint management perspective implies coordinating
actions between businesses. Generating greater economic
value is the main reason for jointly managing different
businesses. The joint management between businesses
aims to increase profits and lower costs (Chandler, 1991;
Foss, 1997; McConnell, 2016); in other words, the aim
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DOI: https://doi.org/10.35692/07183992.12.2.3
is to capture synergies (Ahuja & Novelli, 2017; Ansoff,
1965; Eisenhardt & Galunic, 2000). For Prahalad and
Doz (2003) the bundling benefit must be two-way: busi-
nesses must benefit from joint management, but at the
same time, they must contribute to the company as a
whole.
The multibusiness firm has been indirectly studied
by corporate strategy researchers who have privileged
the configuration of the business portfolio (What busi-
ness to invest in? What business to divest?) and its effect
over performance (Ahuja & Novelli, 2017). Recently,
this stream of literature is valuing the role of joint man-
agement in the multibusiness firm by deepening research
related to corporate centres and mechanisms to capture
synergies. (Ahuja & Novelli, 2017; Menz et al., 2015).
In Colombia, multibusiness firms have not been studied
much, but there are references to business groups.
Business groups in Colombia have been studied mainly
from the economic and financial perspective (González,
Guzmán, Pombo, & Trujillo, 2012), as well as the histo-
rical (Dávila & Dávila, 2014; Rodríguez-Satizábal, 2014)
and journalistic perspective (Silva-Colmenares & Padil-
la-Pardo, 2015). Among the issues addressed, four stand
out: internationalization (De Villa, 2016; Ochoa, 2007;
Silva-Colmenares & Padilla-Pardo, 2015), explanations
for the existence of groups (Rodríguez-Satizábal, 2014;
Wilches-Sánchez & Rodríguez-Romero, 2016), fam-
ily groups (González et al., 2012; Rodríguez-Satizábal,
2014) and coordinated action (Londoño-Correa, 2003a,
2015; Rivas & Ponce, 2015). This literature characterizes
Colombian groups, and emphasizes business portfolio
research (Dávila & Dávila, 2014; De Villa, 2016; Lon-
doño-Correa, 2003b, 2016; Rivas, 2015; Rivas & Ponce,
2015). The foregoing shows that the multibusiness phe-
nomenon has also been studied indirectly in Colombia,
since it has focused particularly on the largest and most
recognized conglomerates and business groups, leaving
out other types of multibusiness firms. It is possible to
infer that the state of knowledge about the multibusiness
phenomenon in Colombia is only emerging, since no
studies have been identified on formal ties that encour-
age the multibusiness phenomenon, the actions that
these companies coordinate and the reasons for doing so.
Understanding the multibusiness phenomenon is the first
step towards enriching the managerial criteria needed to
face the challenges that a corporate management imply.
The question that guided this research was: How is
multibusiness phenomenon characterized? And, other
supporting questions, which emerged from the literature
review, included: What formal ties characterize compa-
nies that exhibit the multibusiness phenomenon? What
actions do they coordinate? Why do they coordinate
these actions? To answer these questions, a qualitative
research was conducted in 21 companies that exhibit the
multibusiness phenomenon, in six Colombian regions.
Four criteria were considered when selecting these com-
panies: multibusiness character validated by the compa-
ny’s website; national capital recognized in the company
declared history; regional representativeness; and access
to information. The data collection techniques included
documentary review and semi-structured interviews with
top managers, while open and selective coding was used
for its analysis.
This paper contributes to the managerial knowledge
of multibusiness firms in two different ways: by iden-
tifying the multibusiness phenomenon in a variety of
companies and by highlighting the benefits of the joint
management of a multibusiness firm. From the exis-
tence of formal ownership ties (that vary between hold-
ing 100% thereof and minority shareholdings) and the
coordinated action between businesses, it was possible to
infer the existence of multibusiness phenomenon within
different types of companies. The variety of companies
is expressed by characteristics such as: different sizes,
family and non-family owned, public or private capital,
competing in related and unrelated industries, with differ-
ent seniority and located both in the capital of the coun-
try or in its different regions. The analysis of coordinated
actions showed the existence of relationships of subordi-
nation as well as of collaboration, which benefits not only
from value generation and cost reduction as expressed in
the literature, but also from risk mitigation. Also note-
worthy among the coordinated actions is the variety of
functions that the corporate centres perform, classified in
this paper as internal and external.
The Multibusiness Phenomenon in the Corporate
Strategy Literature
The multibusiness phenomenon has been studied on cor-
porate strategy literature by addressing two main ques-
tions: 1. Which businesses to be in? 2. How to jointly
manage the businesses? (Menz et al., 2015; Michael
Porter, 1987). This body of knowledge refers both to
the portfolio configuration and to the joint management
of conglomerates and business groups. The multibusi-
ness phenomenon appears when a firm controls more
than one business and, therefore, carries out coordinated
actions not exclusively from relationships of subordina-
tion, but also from those of collaboration. These coordi-
nated actions promote the achievement of objectives of
both multibusiness firms’ and each one of the businesses.
In the corporate strategy literature, it is possible to
differentiate between studies on conglomerates in Anglo-
Saxon contexts and those of business groups, primarily
from emergent countries (Colpan & Hikino, 2018). A Con-
glomerate is a group of autonomous business units oper-
ating in unrelated or weakly related industries (G. Davis,
Diekmann, & Tinsley, 1994, p. 552). Those who study
the multibusiness phenomenon within the framework of
conglomerates, privilege ownership ties that establish
legal relationships of subordination (Bettis, 2017). On
the other hand, Business groups (BGs) are an organiza-
tional model in which collections of legally independent
firms are bounded together with formal and informal ties
and use collaborative arrangements to enhance their col-
lective welfare (Colpan & Cuervo-Cazurra, 2016). The
definition of Business Groups (BG) is inspired by
the ideas of Leff (1978) and Granovetter (1994), that
support much of this literature (Carney, Gedajlovic,
Heugens, Van Essen, & Van Oosterhout, 2011; Colpan
& Hikino, 2018; Hoskisson, Johnson, Tihanyi, & White,
2005; Kandel, Kosenko, Morck, & Yafeh, 2018; Lamin,
2013; Ramachandran, Manikandan, & Pant, 2013). Leff
refers to business groups as multicompany firms which
transact in different markets, but does so under com-
mon entrepreneurial and financial control (1978, p. 663).
Granovetter, for his part, defines business groups as “sets
of legally separate firms bound together in persistent for-
mal and/or informal ways.” (1994, p. 429). These busi-
ness group definitions refer to a set of firms and Khanna
and Rivkin (2001) specify that they are legally indepen-
dent, and emphasis is placed on the formal and infor-
mal ties that keep business groups together. The idea of
legally independent firms refers to companies with a dif-
ferent legal status and independent boards of directors yet
interested in the benefits of coordinated action (Colpan &
Cuervo-Cazurra, 2016; Khanna & Rivkin, 2001). Khanna
and Rivkin (2001) also highlight coordinated action as a
characteristic of business groups.
Business groups are acknowledged in diverse coun-
tries such as Japan (keiretsus), India (Business houses),
South Korea (Chaebol), Hong Kong (Hongs), Taiwan
(Guanxiqiye), China (Qiye jituan), Russia (oligarchs) and
Latin American countries (economic groups) (Carney et
al., 2011; Colpan & Hikino, 2018; Khanna & Rivkin,
2001; Leff, 1978). Both conglomerates and Business
groups jointly manage different businesses, and what is
common between them is the multibusiness phenome-
non. This is evident when looking closely at the set of
businesses and not only at the company as a legal entity.
From a competitive strategy perspective, businesses are
the ones that compete, they have to create and sustain
a competitive advantage through a close understanding
of clients and what they value most (Christensen, Hall,
Dillon, & Duncan, 2016; Porter, 1987). From a corpo-
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DOI: https://doi.org/10.35692/07183992.12.2.3
rate management perspective, both business groups and
conglomerates need to be managed taking into account
a paradox: leveraging business uniqueness while cre-
ating joint value for the company (Birkinshaw, Crilly,
Bouquet, & Lee, 2016). Both, the definitions of con-
glomerate and business group, refer to the multibusiness
phenomenon as a common characteristic.
Multibusiness phenomenon can be identified upon
the existence of both, formal ties and coordinated
actions. The formal ties recognized in the literature from
conglomerate and business groups are those related to
ownership. Such ownership is proportionally repre-
sented in the company’s board of directors, while a com-
mon dominant owner prevails. Even though the literature
from business groups considers informal ties as a main
characteristic, in this research, the idea of multibusiness
phenomenon privileges formal ties and leaves out infor-
mal ties such as director interlocks and family ties (Farías,
2014; Khanna & Rivkin, 2001; Khanna & Yafeh, 2007;
Vanoni-Martínez & Rodríguez-Romero, 2017) and oth-
ers that are difficult to observe (Khanna & Rivkin, 2006).
Ownership has a direct effect on the way that corporate
management can influence businesses, and this is not the
case for informal ties.
In terms of coordinated actions, it is possible to
identify three: portfolio definition, internal and exter-
nal management. Through these corporate functions,
it is possible to create value and reduce costs. Portfo-
lio definition answers questions about the businesses or
markets in which a multi-business firm could invest
or those businesses that they should be divested (Camp-
bell, Goold, Alexander, & Whitehead, 2014). There-
fore, portfolio definition’s actions can be: mergers and
acquisitions (Krühler, Pidun, & Rubner, 2012; Menz
et al., 2015), divestments (Krühler et al., 2012), ventures
(Kunisch, Schimmer, & Müller-Stewens, 2012; Menz
et al., 2015) and alliances (Menz et al., 2015). Internal
management is motivated by the idea of capturing syn-
ergies and is always discretionary. Synergies can be
achieved by sharing resources and capabilities between
businesses (Ahuja & Novelli, 2017; Eisenhardt &
Galunic, 2000; Goold & Campbell, 1998; Goold,
Campbell, & Alexander, 1994). Besides, external manage-
ment can be mandatory or discretionary (Collis, Young, &
Goold, 2012). Mandatory refers to those required by law
for conglomerates or legally defined business groups. On
the other hand, external discretionary functions are the ones
that respond to different stakeholders and Government.
Some examples of internal management functions
include: funding, brand sharing, selling products and pro-
viding services among the grouped businesses, recruit-
ing managers, making joint investments, rotating talent,
exchanging resources and information, joint capital
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raising, among others (Khanna & Rivkin, 2001; Krühler
et al., 2012; Lamin, 2013; Young & Goold, 2000  ).
And examples of external functions include: Lobbying
(Khanna & Rivkin, 2001), corporate social responsibil-
ity, and regional development (Londoño-Correa, 2003a).
These corporate functions are usually performed by
the highest-level hierarchy in the company, called cor-
porate centres. Corporate Centres (CC) are the cen-
tral organizational unit in a contemporary corporation
(Menz et al., 2015) and they are also known as general
offices (Chandler, 1991), Central Commands (Birkin-
shaw, Braunerhjelm, Holm, & Terjesen, 2006; Young &
Goold, 1993) parent companies (Goold, Campbell,
& Alexander, 1995) and administrative headquarters (J.
C. Davis & Henderson, 2008). A corporate centre can be
an independent unit or be immersed in the most import-
ant business of the firm (Collis et al., 2012; Young &
Goold, 2000  ). Another organizational unit that usually
appears when jointly managing are the so called Shared
Services Centres (SCS) that focuses on cost reduction by
standardizing supporting processes of the different busi-
nesses (Ulbrich, Schulz, & Brenner, 2010).
The literature of both business groups and conglomer-
ates allow us to contrast some differences in the expres-
sion of the multibusiness phenomenon that could help
with the identification of its existence and the analysis of
the way multibusiness firms are managed (see Table 1).
Table 1 synthesizes the literature on conglomerates
and business groups and integrates characteristics from
both in a more generic framework: the multibusiness
firm. The idea is not to restrict the research to the previ-
ously established classifications (conglomerates - Anglo-
Saxon contexts; business groups - other countries), but
to deepen the two main characteristics relevant for cor-
porate management: ownership ties and coordinated
actions.
From this synthesis, three propositions guided the
analysis of the empirical evidence:
1. The multibusiness phenomenon can be identified
from the existence of ownership ties and coordinated
action.
2. The corporate management of a multibusiness firm
is motivated by two objectives: value creation and
cost reduction for all the businesses.
3. The multibusiness phenomenon is present not only
in business groups or conglomerates but in a variety
of companies.
Methodology
How is multibusiness phenomenon characterized?
That is the question guiding this research. Such inquiry
 Table 1. Conceptual framework to identify the multibusiness phenomenon
Business groups
Characteristics
Ownership Ties May hold less than 100% ownership.
Subordination
Coordinated Action
Collaboration
Decisions on industries and business selections.
Portfolio Definition
Diversity in modes of development.
It is possible to centralize some activities in
It is possible to centralize all activities that activities in order to lower costs
Internal management order to lower costs or to generate more value
generate value for the conglomerate.
for all businesses.
Some relations with the Government and other
Relations are established with
External management stakeholders are established, as long as they
Government and other stakeholders.
generate benefits for all the businesses.
Source: Authors’ own elaboration
requires descriptive answers that aid in recognizing
characteristics and patterns of social phenomena (Blaikie,
2007, p. 6). Therefore, the qualitative data collected
account for the specificities of the companies exhibit-
ing the multibusiness phenomenon and the way in which
this phenomenon is expressed. The literature review
inspired supporting questions: What formal ties char-
acterize firms that exhibit the multibusiness phenome-
non? What actions do they coordinate? Why do they
coordinate these actions? In order to answer these ques-
tions, we opted for a criterion-type purposeful sampling,
which selects cases that respond to certain guidelines
that safeguard the quality of the research (Patton, 2002,
p. 243). Therefore, companies that met the following two
criteria were chosen: multibusiness character validated
by the company’s website, and possibility of access to
further information. Initially, we started by reviewing a
company’s list published in one of the most influential
economic newspapers in Colombia (LaRepublica, 2015).
Thereafter, the multibusiness character was validated on
the website of each company. For these, we looked for
the description of various businesses in their strategic
statements and organizational charts.
Once the first list of companies that exhibit the
multibusiness phenomenon had been composed, an
appointment was made to interview the top managers
of 32 firms, through the submission of a formal letter
endorsed by EAFIT University. Also, e-mails were sent
through the Contact Us section of their web pages. Of
these 32 applications, only four companies granted us an
interview. This confirms the difficulty of accessing infor-
mation for research regarding companies in emerging
countries (Khanna and Rivkin, 2001) and, specifically,
Conglomerates Multibusiness firm
Varies between 100% and shareholder
100%
minority.
Subordination
Subordination
Collaboration
Decisions on selection of industries and Decisions on industries and business
businesses. Acquisitions as a development selections. Diversity in modes of
mode. development.
It is possible to centralize some
or to generate more value for all
businesses.
Some relations with the Government
the and other stakeholders are established,
as long as they generate benefits for
all the businesses.
in Colombia (Rodríguez-Satizábal, 2014, p. 36). Given
the precariousness of the responses to our request, personal
contacts were sought with top managers from multibusiness
firms. Finally, we could integrate a list of 21 companies that
exhibit the multibusiness phenomenon (see Table 2).
Data collection was carried out through documentary
review and semi-structured interviews of top managers,
i.e., those who had knowledge and direct contact with the
joint management of the grouped businesses. The docu-
mentary review consisted mainly of websites and annual
reports. For both, the documentary review and the inter-
views, a guideline was constructed in order to gather
the information needed to answer the research questions
(Patton, 2002, p. 349) (see Appendix A). Prior to the
interview, the guideline was completed with the informa-
tion from the documentary review. During the interview,
previously identified information was confirmed and sup-
plemented. Authorization to record the interview with
the top managers was obtained from 20 of the 21 com-
panies. In 19 of the 21 companies, personal interviews
were conducted (Galindo, 1998, p. 41), and at least two
interviewers were present for the purpose of contrasting
perceptions and interpretations at the time of data anal-
ysis. For this data analysis, an open and selective cod-
ing was carried out, which enabled the construction of
descriptive tables on the main concepts that guided the
data collection. These concepts are synthesized catego-
ries presented in table 1 that supported the data in order
to answer the questions (Patton, 2002, p. 456). Table 2
shows the companies studied that exhibit the multibusi-
ness phenomenon, as well as the role of the interviewees
and the interview date.
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 Table 2. Multibusiness firms studied

Colombian
MBF’s Name Role of interviewee Date of interview (2017)
Region (see Appendix B)

Procaps Chief executive Officer (CEO) Jun-08

Caribe Olímpica Chief Finance Officer (CFO) Jun-08

Promigás CEO Apr-25

Organización Terpel Chief Marketing Officer (CMO) Apr-26

Bogotá, Capital district Alquería Administrative and Financial Director Apr-25

Valorem Vice-president of Corporate Affairs Apr-26

Vanguardia Liberal CEO Jun-21

Grupo OBA CEO Jun-21

Santander
Grupo Marval CEO Jun-21

Chief Administrative Officer (CAO) Jun-21

Grupo Orbis CEO Mar-03

Grupo Nutresa CEO Apr-03

Grupo EPM CEO Mar-30

Antioquia
Grupo Suramericana CEO May-16

ISA CEO Apr-18

Grupo Argos CEO May-30

Colombina Chief of Strategy Officer (CSO) May-02

Valle del Cauca
Organización Carvajal CEO May-02

Member of the Board of Directors Jun-02

Grupo Arme CEO Apr-17

Tecnodiesel CEO May-12

Eje Cafetero
Gensa CEO Apr-28

Grupo empresarial Frisby CEO Apr-28

Co-founder
Source: Authors’ own elaboration

The qualitative nature of this study on the multibusi-
ness phenomenon does not allow for the generalization
of the results of all companies; however, it does facilitate
characterizing this phenomenon from the perspective of
the top management executives, accountable for manag-
ing the multibusiness firms.
Characterization of the Multibusiness Phenomenon
The study of 21 Colombian firms that exhibit the mul-
tibusiness phenomenon recognizes the ownership ties
and coordinated actions that characterize them. The
data revealed specificities of the companies that exhibit
it. In identifying the businesses of each company
studied, a variety of entities came to light: legally inde-
pendent companies, business units and even projects.
For instance, Grupo Argos coordinates the activities of
independent companies traded on the Stock Market
(Celsia), while Procaps coordinates business units, and
Marval, as usually happens in construction companies,
coordinates projects in different regions of the country,
but manages them as independent businesses. Table 3
shows the characteristics of the multibusiness firms and
the activity that gave rise to the company, the industries
in which they currently compete, as well as the number of
entities each company comprises, and the business divi-
sionalization criteria.
As can be seen in table 3, seven of the companies
that exhibit the multibusiness phenomenon studied
were founded before 1950. The equity that gave rise to
the companies founded in this first period was private.

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 Table 3. Expression of the multibusiness phenomenon in the 21 Colombian companies studied

Multibusiness Firm Grouped entities Divisionalization

Core Business Activity Industries
and year of foundation (2017) criteria

Procaps Customer segment (CS),

Pharmaceuticals Pharmaceutical 5
1977 Product/service (P/S)

Olímpica Retail, Finance, Broadcasting, Pharmaceutical,

Retail trade 15 P/S
1953 Food Processing, Airport concession contracts.

Promigás Transport and Distribution Gas Production and Distribution, Port Activities P/S,
18
1958 of Energy and Services Geographical area (GA)

Organización Terpel Transport and Distribution Fuel and Gas Wholesale and Retail Oil and P/S,
3
1968 of Energy Lubricants, Convenience stores and other services CS

Alquería Dairy products processing, wholesale trade of food

Dairy Producer 25 CS, product attributes (PA)
1959 products.
Investments, Media and Entertainment, Logistics
Valorem
Investment and Transportation, Real Estate, Environmental 13 Industry (I)
1997
Services, Retail.
Vanguardia Liberal P/S
Media Media and Publishing, Investment, Real Estate. 5
1919 GA

Grupo OBA Marketing of textile Wholesale trade of textile products, Logistics and Value chain (VC)
6
1974 products Financing. I

Marval Project,
Building and Construction Construction, Real Estate 80
1976 GA

Grupo Orbis Wholesale trade, Manufacture of paints, water

Trade 4 VC, I
1921 pipes, chemicals.
Processed Food
Grupo Nutresa Processed Food Manufacturing and Marketing, P/S,
Manufacturing and 44
1920 Retail Food, Investments. VC
Marketing
Generation, Transmission, Distribution and
Grupo EPM Marketing of Electricity, Water Treatment P/S
Home utilities 14
1955 and Distribution, Wastewater Evacuation and VC
Treatment, Gas Production and Distribution.
Grupo Suramericana
Insurance Insurance, Social Security and Health Services. 9 P/S
1944
Electric Energy Transport, Information and
ISA
Electrical interconnection Communications Technology, Road Concession, 48 P/S
1967
Real-Time System Management.
Grupo Argos Cement, Energy, Road and Airport Concessions, P/S,
Cement 91
1934 Ports and Coal. I

Colombina 1927 Confectionery Processing and Marketing of Food 6 Product/service

Packaging, Education, Technology and Services,

Organización Carvajal Communications Solutions, Furnishing Solutions
Publishing 7 P/S, I
1904 and Architectural Spaces, Fine printing, Office
Supply and Writing Papers.

Manufacture and Marketing of Metal Products

Grupo Arme
Metallurgical Manufacture Manufacturing and Marketing for Structural Use, 5 P/S
1973
Vehicle Distribution.

Tecnodiesel Power Generator Retail, Electrical and Automotive

Power Generator Retail 4 P/S
1979 Machinery and Equipment.

Generation and Commercialization of Energy,

Gensa
Electricity generation Project Management and Maintenance of Power 3 P/S
1993
Plants.

Grupo empresarial
Food Production, Fast Food Restaurants,
Frisby Fast Food Restaurants 4 P/S, VC
Franchises, Events.
1977

Source: Authors’ own elaboration

19
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Between 1951 and 1997, the other 14 companies
studied were founded. Within this group, 5 are dedicated
to home utilities and energy transportation and distribu-
tion, and 4 of these companies were created by the Gov-
ernment, both at a regional and national level. Most of
the firms (8) were created between 1961 and 1980. As
for their family character, 12 of the 21 companies are
family-owned. All of the companies that were born as
family owned businesses continue to be recognized
as such after their growth into multibusiness firms. More-
over, the case of Tecnodiesel also stands out, as it emerged
from a business partnership and was later acquired by a
family that currently manages it (see table 3). Of the mul-
tibusiness firms considered, 9 compete in the Colombian
and Latin American markets. In turn, Nutresa, Argos, and
Colombina are also doing business in countries such as
the United States and Spain.
As shown in table 3, the firms that exhibit the multi-
business phenomenon analysed had their origins in one
economic activity and, as they grew, decided to set up
new businesses. In all cases studied, the activity of the
original business remains. Table 3 also makes it possible
to compare the diversity of the industries wherein the 21
companies studied compete. For example, Procaps has
undertaken three different businesses within the same
pharmaceutical industry. Nutresa (Processed Food Man-
ufacturing and Marketing) and Suramericana (Insurance)
have entered into different but closely related businesses.
In contrast, Olímpica has diversified into industries such
as pharmaceuticals, airport concessions, food manufac-
turing, among others.
The analysis of the industries where the companies
studied compete made evident the investments in the same
extended value chain. For instance, Olímpica was born as
a Food Retailer and later entered into food processing and
logistics. It is also possible to observe this phenomenon
when wholesale trading companies, such as Grupo OBA,
complement their services to current or future customers
with logistics and financial operations. In contrast, Valor-
em’s investment criteria do not focus on the value chain,
for it rather favours disruptive business models with the
potential to generate over double-digit returns.
In relation to the divisionalization criteria, 15 com-
panies use the products-and-or-services criterion to sep-
arate businesses. ISA and Colombina are examples of
this. In the first case, the company’s businesses include
electricity transmission, information technology, road
concessions and real-time systems management, while
Colombina´s businesses include ice cream and sauces,
biscuits and cakes, confectionery and preservatives.
Colombina also applies the geographic zone criterion for
two businesses: Capsa Guatemala and Alcalá de Henares
20
Multidiscip. Bus. Rev. | Vol. 12, N° 2, 2019, pp. 13-28, ISSN 0718-400X
DOI: https://doi.org/10.35692/07183992.12.2.3
Plant. Customer segment criteria and product attributes
have also been considered when divisionalizing their
businesses. Alquería focuses on the benefits that its cus-
tomers derive from the product’s attributes: nourishment,
well-being, indulgence and snacking. On the other hand,
Organización Terpel combines the product/service crite-
ria with the following types of customers: gas stations,
complimentary services, lubricants, aviation, industry,
and marine-related.
The following sections describe some evidence of the
ownership ties and examples of coordinated actions that
characterize the multibusiness phenomenon in the anal-
ysed companies.
Ownership Ties
The most obvious formal ties which define the 21 firms
that exhibit the multibusiness phenomenon in Colombia,
are ownership relations. These relationships may be hold-
ing 100% of ownership, command & control and minority
shareholdings. Out of the 21 companies, 20 provided
information on ownership relationships. Among these,
7 have 100% ownership of the businesses they group
together (see table 4). Most of the companies studied (10)
combine holding 100% of the company and command &
control. On the other hand, Promigas, Valorem and ISA
have all three types of ownership relations, that is, they
are also interested in minority shareholdings.
Thanks to the interviewee’s testimonies, it was pos-
sible to differentiate positions in relation to ownership.
Some considered 100% ownership essential to coordi-
nate actions, as is the case of Procaps, where the inter-
nally developed knowledge and innovation, are highly
valued and protected.
Coordinated actions
Once the shift from a stand-alone business to a multi-
business firm is carried out, the corporate centre performs
three types of corporate functions: portfolio definition,
external and internal management.
Portfolio Definition
Portfolio refers to the set of companies, businesses or
projects that make up the multibusiness company. The
portfolio definition function was identified at two points
in time: when the original business splits off, or when it
creates or acquires other businesses and, subsequently,
when it implements its development or divestiture strat-
egy. When faced with their company’s development and
divestiture mode (the former understood as the mecha-
nisms through which companies grow into other busi-
 Table 4. Ownership ties in the Colombian Multibusiness Companies studied

Ownership Ties

Name 100% Command & control Minority shareholding

Procaps X

OBA Group X

Marval X

Grupo Suramericana X

Colombina X

Tecnodiesel X

Grupo empresarial Frisby X

Olímpica X X

Gensa X X

Alquería X X

Grupo Arme X X

Vanguardia Liberal X X

Organización Carvajal X X

Grupo Orbis X X

Grupo Nutresa X X

Grupo EPM X X

Grupo Argos X X

Promigás X X X

Valorem X X X

ISA X X X

Terpel Organization (NI)

Source: Authors’ own elaboration

nesses and the latter as the exit from a business) the acquisitions. Strategic alliances and non-related acquisi-
interviewees stated that they use different modes of tions are the least common. Only 5 companies acknowl-
development (see figure 1). edged having made divestitures. It is common to find
combinations of development modes, the most
Figure 1. Modes of development and Divestiture frequent being corporate ventures and related acquisi-
tions. Besides, 5 of the 21 companies combine 3 or 4
modes of development: Olímpica, Alquería, Vanguardia
Develpement and Divestitures Modes

Divestitures 5

Liberal, Nutresa and Colombina. In contrast, Valorem

Strategic alliances 4
only uses non-related acquisitions, while Oba and Mar-
Non-related val only use corporate ventures. Promigas, Vanguardia
3
acquisitions
Liberal, Nutresa, Suramericana and Arme acknowledge
Related acquisitions 16
having carried out divestitures.
Corporate ventures 19

0 10 15
# of companies
As can be seen in Figure 1, most of the 21 compa-
nies studied opt for corporate ventures and related
20 Internal management
Internal management refers to centralized administrative
activities. These activities are carried out from corpo-
rate centres that may be independent or immersed within
the original company. Of the 21 companies analysed, 14

21
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DOI: https://doi.org/10.35692/07183992.12.2.3
have independent corporate centres and 7 have immersed
corporate centres. All of the companies studied reported
centralizing the financial functions. Also, 9 of them cen-
tralize transactional administrative activities such as pay-
roll, procurement and information technology, through a
Shared Service Centre (SSC). The companies that have
independent corporate centres and also have a SSC are:
Procaps, Promigás, Alquería, Orbis, Nutresa, Surameri-
cana, EPM, Carvajal and Arme.
External management
External management accounts for how each multibusi-
ness company relates with the Government, and other
stakeholders, either directly or through business associa-
tions. Of the 21 companies that exhibit the multibusiness
phenomenon studied, 19 acknowledge that they perform
external management activities vis-à-vis the Govern-
ment. The companies that undertake external manage-
ment directly do so through their Chief Executive Officer
(CEO) (12 of them) and the Chief Legal Officer (CLO)
(12). It should be noted that in 8 of the 12 companies
that are family businesses, the family plays a leading role
in external management. In relation to the other stake-
holders, 14 companies relate to them through their own
Non-Governmental Organization (NGO). Since we are
not focusing exclusively on legally recognized business
groups, we did not ask for mandatory external functions.
Table 5 contrasts the main characteristics of the multi-
business phenomenon with the empirical evidence.
Reasons for Coordinated Action
The reasons stated by the interviewees for coordi-
nating actions, fall into three categories: generat-
ing new value for the business, cost reduction and risk
mitigation. For 8 of the 21 companies studied, new value
generation justifies being part of the multibusiness com-
pany, whereas for three of them the main reason is the
reduction of costs, and 9 of them argued both reasons.
When referring to new value generation, some reasons
include: avoiding the commoditization of their products,
brand development for products and services, greater
value generated by the support of the multibusiness firm
(being worth more due to being part of), generation of
new knowledge, intellectual agenda in the training
of managers, disclosure of hidden value from collabo-
rations between businesses and the corporate headquar-
ters, among others. The main reasons given regarding
cost reductions are non-replicated processes, legal effi-
ciency to manage independent companies, lower interest
rates and higher quotas in bank loans for group negotia-
tions, operational efficiencies in information technology
and supply, control and optimization of resources. Also,
interviewees referred to risk mitigation as an important
reason for jointly managing the businesses.
Aside from the economic objectives that drive the
existence and management of the multibusiness firms,
the interviewees expressed concern regarding carrying
out activities that favour regional and national develop-
ment. Of those interviewed, 14 explicitly expressed an
interest in regional development, arguing issues such as
the need to create jobs, support culture and improve the
conditions of disadvantaged local communities.
Discussion
Contrasting the conceptual framework and the findings
of this study (table 5) allowed for the identification of the
multibusiness phenomenon from the existence of own-
ership ties and coordinated actions. These research find-
ings confirm that the multibusiness phenomenon is the

Table 5. Conceptual Framework vs findings

Multibusiness firm MBF studied

Characteristics
100%, command &control and minority shareholdings,
Ownership Ties Vary between 100% and shareholder minority
and combinations
Subordination
Coordinated Action Subordination and collaboration
Collaboration
Decisions on industries and businesses selection.
Portfolio Definition Related acquisitions and corporate ventures, mainly
Diversity in modes of development.
Value generation
It is possible to centralize some activities in order to
Internal management Cost reduction
lower costs or to generate more value for all businesses
Risk mitigation

Some relations with the Government and other Government Relations

External management stakeholders are established, as long as they generate Other Stakeholders through NGO
benefits for all the businesses Interest in regional and national development

Source: Authors’ own elaboration

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DOI: https://doi.org/10.35692/07183992.12.2.3
outcome of strategic actions upon growing into new busi-
nesses or splitting off from the original one. When a set
of businesses is formed, particular ways of managing are
set up, which complement the management of a stand-
alone business. This corporate management finds support
for a variety of ownership ties. For some, it is based on
100% ownership of the entities they group together (sim-
ilar to conglomerates). Others combine 100% ownership
with command & control, while a third group employs
the three ownership ties: holding 100% ownership, com-
mand & control and minority shareholding. It is import-
ant to highlight that in some of the multibusiness firms
studied, the three alternatives are used simultaneously.
In light of coordinated actions, external management
stands out as a function carried out by most of the studied
firms. The analysis of internal management in the multi-
business firms studied shows different degrees of formal-
ization within the joint management. While some have
corporate centres immersed within the original business,
others have independent ones and even shared service
centres (Goold, Campbell, & Alexander, 1998). As for the
definition of their portfolio, corporate venture can be rec-
ognized as the main mode of development, usually com-
bined with related acquisitions. This can be explained by
the concern of sharing resources and capabilities in pur-
suit, not only of new value creation or cost reduction,
but also for risk mitigation. This finding complements
Chandler´s and Foss’ ideas about corporate management.
The coordinated actions that characterize the multibusi-
ness phenomenon in the firms studied, shows that their
reasons declared for grouping are not only due to the
improvement of the company’s economic performance
by capturing synergies. In some cases, they also pursue
regional and national development purposes.
Empirical evidence suggests that formal ownership
ties are related to the degree of activities that they choose
to coordinate. Thus, companies holding 100% owner-
ship showed greater centralization of activities through
corporate centres and an SSC. In contrast, minority
shareholding restricts the possibilities of coordina-
tion and centralization to those activities that business
managers consider relevant for their competitive strategy.
In other words, in the presence of minority shareholdings
it is not enough to only benefit the multibusiness firm,
instead, it has to directly benefit each one of the busi-
nesses involved. These different degrees of ownership
ties can explain the collaborative relationships between
grouped entities rather than those of subordination as
occurs within conglomerates.
Aside from formal ownership ties, legal acknowledg-
ment ties were identified as another criterion for valida-
ting the existence of a business group in Colombia. This
means that formal ties may pertain to ownership or legal
acknowledgment; however, the latter is not a condition
for the existence of the multibusiness phenomenon.
Colombian firms that exhibit the multibusiness phe-
nomenon indicate that it is present in companies which
are large and small, family and non-family owned, of
public and private equity, competing in different indus-
tries, related or unrelated, have different seniority, and are
located both in the capital and in the different regions of
the country. The 21 firms analysed account for this variety.
For example, Nutresa is recognized as a large multibusi-
ness firm, not only because its CEO claims coordinating
activities of 73 companies, organized into 8 businesses,
but also, he asserts that Nutresa has more than 35,000
employees in Colombia and more than 12,000 abroad.
Moreover, this group is not a family business, its equity is
private. Nutresa competes in the food industry, and it was
founded almost 100 years ago in a city different from the
capital of the country. In contrast, Tecnodiesel is another
company that also presents the multibusiness phenome-
non. It is family owned and coordinates 4 different busi-
nesses. It was created in a city different from the capital
of the country, almost 40 years ago. Tecnodiesel claims to
have approximately 250 employees.
An additional expression of this variety arises when
analysing companies that compete in the industrial chain
of the energy industry. In this case, there were large gov-
ernment-owned companies, such as EPM, but also pri-
vate companies such as Promigas and some other smaller
ones, such as GENSA. As can be seen, the multibusi-
ness phenomenon is not limited only to family groups
(Rodríguez-Satizábal, 2014).
Conclusions
The multibusiness phenomenon in Colombia is expressed
in a variety of companies characterized by ownership
ties and coordinated actions. This kind of phenomenon
emerges when a company moves from a single business
to several. This way of growing leads to complementing
the management focused on creating and sustaining the
businesses’ competitive advantages, with corporate con-
cerns; for instance, creating a greater economic value for
the multibusiness company while reducing costs for the
businesses and mitigating risks.
The formal ties that characterize the 21 multibusi-
ness companies studied are those of ownership ties. The
actions coordinated by these companies fall into three
groups: portfolio definition, external management, and
internal management. Portfolio definition highlights the
combination of development modes between corporate
ventures and related acquisitions.
23
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DOI: https://doi.org/10.35692/07183992.12.2.3
 Most of the multibusiness firms studied perform
external management, with the Government and other
stakeholders. When it comes to the Government, the
responsibility assumed by top management and families
(in the case of family businesses) complement the role
played by general and specialized business associations.
NGOs are also highlighted as the mechanism through
which they interact with other stakeholders.
All the companies studied carry out internal financial
management activities. In the case of multibusiness firms
that centralize transactional activities such as payroll,
some purchases and the handling of information technol-
ogy is carried out through an SSC. The reasons for all
the coordinated actions include, not only achieving eco-
nomic objectives, but also regional and national devel-
opment.
It seems that the degree of corporate coordinated
actions depends on the ownership ties between the
grouped entities. This relationship deserves further
studying. Likewise, it would also be desirable to study
activities and processes that, while generating new value,
they can also reduce costs, and vice versa. Moreover, it is
necessary to investigate in greater detail, the relationships
of subordination and collaboration among the grouped
entities. It would be desirable to analyse both hierarchi-
cal relationships and lateral mechanisms that facilitate or
inhibit new value capturing, cost reduction and risk miti-
gation. In the same vein, it would be worth comparing the
criteria for separating the entities grouped into business
units, as well as the criteria for choosing the development
modes that configures the company’s business portfolio.
One of the limitations of this study is the focus on top
management. This becomes an invitation to complement
the views of top management with the ones of other hier-
archical levels in the multibusiness firms.
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Appendix A. Documentary review and Interview Guide
Multibusiness Firm Name

Interviewee

Interviewers

Category Subcategory Description Source

Basic description Origin of the capital

It is recognized as familiar group

Principal domicile

Sectors in which they declare to participate

Number of enterprises that they group

Name of the enterprises that they group

Countries in which it operates

Number of employees

Year of original foundation

Annual sales consolidated in dollars for 2016

Equity consolidated in dollars for 2016

What relationship of similarity or

Property ties Relationship between sectors complementarity exists between the
different businesses?

% of declared participation

Which is the mode of current

development? Internal
Mode of development
entrepreneurship? Partial or total
acquisitions? Joint ventures?

Why is the group kept under a joint

Purpose Purpose
management?

Who defines the portfolio of

Portfolio Definition
businesses that integrate the group?

External management

Internal management What activities are centralized?

Who has and how are the rights of

Joint Management Rights of decision
decision making assigned?
Who participates in the definition
of the competitive strategy of
Definition of the strategy the businesses? When does the
corporative centre intervene in the
business management?

Communications
How do you track the performance of
Performance tracking
the businesses?
Number of employees
Structure Group
Type of structure
Corporate centre Number of employees

Shared services centre Number of employees

How and in which spaces do you
Lateral mechanisms establish lateral relationships
between the businesses?

(Continued)

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DOI: https://doi.org/10.35692/07183992.12.2.3
Appendix A. Documentary review and Interview Guide
Category Subcategory Description Source
Synergies Oriented to new value creation Examples

Oriented to costs reduction Examples

Origin from corporate centre or by collaboration between units Who had the idea of these synergies?

Since when have you beenlooking for

Maturity in the search for synergies the synergies? Are they more oriented
towards efficiency or knowledge?

Who promotes and participates in the

Mechanisms of coordination for the capture of synergies processes of capturing the synergies?
How do you do it?

How do customers benefit from the

Synergies oriented to clients
synergies that you achieve?
How do you measure the capturing of
Performance indicators
the synergies?
What did we not ask, and you think it is important in terms of the
management of the business conglomerate?

Appendix B

“Colombia is a country of cheerful, warm and authentic people, the fruit of a historical legacy of different cultures and ethnicities. More than 200 years ago, Span-
iards, indigenous people and Africans participated in the conception of our identity” (Procolombia, 2019). Colombia’s surface area has 1,141,7 square kilometres
(TheWorldBank, 2019). In 2018, it had 43,835,324 inhabitants, of which 77.1% lived in municipal areas (DANE, 2019). The Gross Domestic Product in 2018
was US330,228 billion (TheWorldBank, 2019).

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DOI: https://doi.org/10.35692/07183992.12.2.3